1. Economy and economics

An economy consist of the economic system of the country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area.

In modern economies, there are four main sectors of economic activity:

1. Primary sector of the economy. Involves the extraction and production of raw materials, such as corn, coal, wood, and iron. (A coal miner and a fisherman would be workers in the primary sector)

2. Secondary sector of the economy. Involves the transformation of raw or intermediate materials into good (manufacturing steel into cars, or textiles into clothing). A builder and a dressmaker would be workers in the secondary sector.

3. Tertiary sector of the economy. Involves the provision of services to consumers and businesses, such as baby-sitting, cinema and banking. (Accountant would be workers in the tertiary sector)

4. Quaternary sector of the economy. Involves the research and development needed to products from natural resources. Note that education is sometimes included in thai sector.

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. Current economic models emerged from the broader field of political economy in the late 19^th century.

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war, and science.

The primary textbook distinction is between microeconomics, which examines the behavior of basic elements in the economy, including individual markets and agents (such as consumer and firms, buyers and sellers), and macroeconomics, which addresses issues affecting an entire economy, including unemployment, inflation, economic growth, and monetary and fiscal policy. Other distinctions include between theory and applied economics, and between positive economics (describing “what is”) and normative economics (what ought to be).

2. Microeconomics and macroeconomics

Economics is usually divided into main branches:

1. Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize it's production and capacity so it could lower prices and better compete in its industry

2. Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole and not just on specific companies, but entire industries and economies. This looks at economy-wide phenomena, such as Gross National Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by unemployment rate.

While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.